The ministry of Corporate Affairs on Wednesday barred about 3 lakh directors of companies which have defaulted on statutory compliance. These include the directors of shell companies which haven’t filed returns for the past 3 years.
These directors as a result won’t be allowed to serve on the board of other companies. This has reportedly been done to improve the corporate governance and reduce the financial wrongdoings carried out by the shell companies.
Apart from this, the government has also removed 2 lakh shell companies from the Registrar of Companies and has also put restrictions on their bank accounts. Also it has been reported that, if the directors of these de-registered companies try to siphon off the money present in the firm’s bank account, they can attract a prison sentence of upto 10 years. Plus if the fraud involves public interest the jail sentence won’t be less than 3 yrs and a triple penalty would be imposed.
The ministry has also reportedly claimed that it is tracking the action regulatory agencies are taking against professionals like chartered accountants, company secretaries and cost accountants who colluded with shell companies to carry out financial irregularities. The government also claimed that the actual beneficiaries and people behind these shell companies are being tracked.
P.P Chaudhary the new Minister of State for Corporate Affairs who took charge of the ministry on Monday was quoted as saying that:
Weeding out shell companies would not only help in checking the menace of black money but also would promote an ecosystem of ease of doing business and enhancing investors’ confidence
There have been other measures which the government agencies have taken to clamp down on shell companes. We had reported as to how the Enforcement Directorate raided hundreds of locations in 16 cities in April to hunt for shell companies.
Some of the companies which were raided had links to prominent politicians like YSR Congress chief Jagan Mohan Reddy, NCP leader Chhagan Bhujbal and a controversial Noida bureaucrat Yadav Singh. These companies were believed to be in violation of the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) acts.
Contributor at OpIndia.com,
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